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June 30, 2018

Fintech emerges as the most favoured sector among VCs in Q2 2018

Fintech Companies grabbed 26% of all Venture Capital (VC) funding in the quarter ended June 2018 - 24 deals worth $81 million - compared to 11% in the immediate previous quarter. (Health tech investments had grabbed the top spot in Q1 2018.) Investments in Fintech were led by large investments in trade finance and factoring company Drip Capital and SME loan marketplace CoinTribe. Lending startups (12 investments worth $47 million) accounted for 50% of the Fintech investments.


Overall, VC firms made 92 investments worth $392 million in Q2’18, data from Venture Intelligence  shows. Investment value increased by more than 20% compared to Q2’17 as well as the immediate previous quarter (which registered investments worth $315 million). In volume (no. of deals) terms, the figure was 12% lower compared to the 104 deals worth $318 million recorded in Q2'17 and flat compared the immediate previous quarter (which registered 95 deals). Note: Venture Capital is defined by Venture Intelligence as Seed to Series D round investments in companies less than 10 years old with value of up to $20 Million.

Healthcare analytics startup SigTuple raised a $19 million Series B led by Accel India and IDG Ventures India. Tea chain Chai Point raised a $17.5 million Series C round led by Paragon Partners. B2B E-commerce company Bizongo raised $17 million as part of its Series B round, led by Eduardo Saverin’s B Capital Group and IFC.


By Sector

Tech companies attracted 80 investments (87% of the activity) worth $299 million during Q2’18. Of the 12 VC investments (worth $85 million) that went into non-tech companies, the largest were ChaiPoint (Tea Chain), X1 (Motor) Racing League, IndiQube (Co-working space) and WonderChef Home Appliances

Consumer focused companies grabbed 60% of the VC funding - 55 investments (worth $224 million) - in Q2’18, compared to B2B companies which attracted 37 investments (worth $168 million). Apart from the above companies, top investments in consumer companies include Meesho (Social Selling) and RailYatri (Content - Rail Travel).



E-Commerce grabbed 14 investments (worth $79 million), followed closely by Healthtech with 13 deals worth $26 million. 

Investments by City


VC Investments in Bangalore-based companies fell fell by 17% . Mumbai startups bounced back to equal with NCR attracting 23 investments. Coimbatore sneaked in at fourth place with two VC investments, after Chennai (5). Investments in other cities fell by 76%.


Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 28, 2018

Q2’18 is Biggest Ever for PE Investments in India at $8.2 B; up 60% YoY

With 24 investments worth over $100-M each, Mega Deals are back with a bang.

12 Deals over $200-M each account for 64% of the total investment value

Private Equity firms invested a record $8.2 Billion (across 158 deals) during the quarter ended June 2018 – up 60% compared to the $5.1 Billion (across 153 transactions) in the same period last year, according to early data from Venture Intelligence. The investment amount in Q2’18 was as much as 112% higher than the immediate previous quarter (which had recorded $3.9 Billion being invested across 157 transactions). Note: These figures include Venture Capital investments, but exclude PE investments in Real Estate.


The latest quarter witnessed 24 PE investments worth $100 million or more (accounting for almost 83% of the total investment value during the period) compared to just 10 such transactions in Q2’17, the Venture Intelligence data showed. Of these, 12 were larger than $200 million each (by themselves accounting for 64% of the total value) - compared to seven such investments in the year ago period. The latest figures takes the total PE investments in the first half of 2018 to $12.4 Billion (across 315 deals) – a figure similar to that recorded in first half of 2017 (across 358 transactions). (Calendar 2017 was the biggest ever year for PE investments in India, recording $23.5 Billion across 660 deals.)



The biggest PE investments reported during Q2’18 included the investment by Partners Group in outsourced IT product development firm GlobalLogic (via a secondary purchase from Apax Partners) for about $960 million, followed by Temasek’s contribution of about $760 million to the buyout of the L&T Electrical & Automation business by Schneider Electric.

By Industry


IT & ITeS companies accounted for 31% of the PE investment pie ($2.6 Billion across 83 deals), led by the GlobalLogic deal and included Temasek’s $250 million investment in another mature IT Services firm, UST Global. Internet & Mobile companies - Paytm E-Commerce ($450 million); PolicyBazaar ($236 million) and Swiggy ($210 million) – completed the list of Top 5 PE investments in Tech during Q2’18. Manufacturing companies, led by the L&T E&A Business, attracted 16% of the pie ($1.3 Billion across seven deals). Healthcare & Life Sciences companies (led by ChrysCapital’s $350 million investment in Mankind Pharma) accounted for 12% and Energy companies (led by the Greenko Group investment) for 10%. The share of BFSI companies slipped to less than 10% of the pie during Q2’18, despite attracting four investments of over $100 million – in IARC; AU Small Finance Bank; IndiaFirst Life Insurance and India Infoline Wealth.

Subscribers to Venture Intelligence products will be mailed the detailed quarterly reports shortly.


Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 27, 2018

Why IBC and other Big M&A Deals Take Forever to Close

Extracts from the recent Times of India article on the topic:


While shareholder activism, regulatory roadblocks and tightening of acquisition financing are among different reasons behind slow-moving M&As in the country, one key factor that stands out is the rise of desperate or compulsive deal-making.
...There is a struggle in marrying economic and regulatory interest in some cases. For instance, private equity firm General Atlantic's acquisition of share share registry Karvy Computershare has been waiting for nearly one year as Sebi decides on allowing financial investors control of market infrastructure institutions without adequate restrain.
...Deal-making under the Insolvency Insolvency and Bankruptcy Code - Binani Cement, Jaypee Infratech and Essar Steel - has witnessed high drama usually associated with Bollygarchs (a reference to big Indian industrialists wielding influence over social and political narratives) on the march, often putting lenders, resolution professionals and the National Company Law Tribunal on the back foot. Economic Laws Practice partner Darshan Upadhyay said, "We have not only seen changes and challenges, many of the matters have landed before judicial forums. Other regulations have not kept pace with the situation to have an integrated solution."

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 26, 2018

Legal Capsule: Enforcement of Foreign Awards in India: by Economic Laws Practice

India has over time acquired a reputation as a ‘difficult jurisdiction’ from an arbitration perspective, especially given heightened concerns on enforcement of foreign awards and the frequent judicial intervention from Indian courts under the Arbitration and Conciliation Act, 1996 (the “Act”).

The Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”) was an attempt by the Indian legislature to address many of these factors. This article explores some of the key issues for parties to consider to ensure a smooth enforcement process of foreign seated arbitration awards in India.
  • How does the seat of arbitration impact enforcement in India?

    While the Arbitration Act mandates that a foreign award can be directly enforced in India if it originates from a country which is a party to the New York Convention (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958) and has been notified for reciprocal enforcement of awards by the Government of India, it is noteworthy that presently only 48 out of 196 signatory countries to the New York Convention have been so notified (for list of these countries, please refer to the annexure). Therefore, it becomes important for parties to ensure that their arbitration proceedings are seated in one of these 48 countries.
  • Which courts can arbitration proceedings be initiated in?

    In order to prevent foreign parties from being dragged to lower domestic courts while challenging international arbitration proceedings and awards, the new Act now clarifies that only the High Courts – which have better trained judges and are often in the capital cities of various states – will have jurisdiction to entertain court proceedings in relation to an international commercial arbitration. Thus, for purposes of enforcement of foreign awards in India, a party must only consider the jurisdiction of the High Court in which the judgement debtor or their assets are located. 
  • What is the procedure for filing of enforcement proceedings?

    In the case of Fuerst Day Lawson, Supreme Court of India has held that a sole execution application before the relevant High Court would suffice to cover the two-step process required for execution of the foreign award; i.e. (i) testing enforceability of the award in terms of sections 47 to 49 of the Act; and (ii) if the award was found to be enforceable, the procedure for execution of the award as a decree of the court. It must be noted that the execution application requires filing of the original or copy of the award (in English language), duly authenticated in the manner required by the law of the country in which the award was made, and the original or copy of the arbitration agreement, pursuant to which the arbitration was initiated. 
  • Can the enforcement of award still be challenged on the (infamous) ‘public policy’ ground?

    Once the application for executing the award is filed, enforcement of an award can be contested on the grounds enumerated at Section 48 of the Act. While many of these grounds are similar to those contained in the New York Convention, refusing enforcement on the ground that ‘enforcement of the award will be contrary to the “public policy” of India’ had emerged as the most contentious(and staple) method of resisting enforcement of arbitral awards in India. To address this, the Amendment Act has now clarified that an award can be held to be against “public policy” only if (a) the award suffers from fraud or corruption; (b) conflicts with the fundamental policy or Indian law or (c) conflicts with most basic notions of morality and justice. The Amendment Act has also clarified that when judging whether an award is against fundamental policy of Indian law, the courts will not review the merits of the dispute. Following suit, the Indian courts have now become quite strict in entertaining the “public policy” argument. In Cruz City  and NTT Docomo , the Delhi High Court while upholding the foreign awards (allegedly in violation of provisions of Foreign Exchange and Management Act, 1999), noted that the violation of specific provisions of an enactment is not synonymous with violation of public policy of India. Similarly, in the case of KandlaExport,  the Supreme Court has clarified that there is no statutory appeal allowed under the Act against an order enforcing foreign awards.
  • How can you secure an award during the pendency of a challenge to enforcement?  

    The courts have recently been willing to secure the amounts due from a judgment debtor under a foreign award, in order to ensure that the interests of award holders are protected pending enforcement. The Bombay High Court, in Aircon Beibars , secured the sums due under a foreign award pending enforcement while noting that ‘recourse to Indian courts for interim measures in relation to a foreign seated arbitration is a transitory provision and can be invoked pending enforcement of the foreign award’. Similarly, in TRAMMO DMCC , the Bombay High Court allowed the holder of a foreign award to apply for interim relief to a court which enjoyed jurisdiction over the assets of the judgment debtor. Additionally, any such remedies which are available in respect of a final award to a party are equally available in respect of any interim award, as Section 2(c) of the Act provides that “arbitral award” includes interim award.

Conclusion

The Amended Act is indeed a step in the right direction. The judiciary has also done its bit to uphold the intent of the legislature by passing several landmark orders recently that have fostered the faith of the parties in the enforcement process in India. 

There are still issues that remain, such as the debate on enforcement of emergency awards. As an example, the concept of emergency arbitrator has not been statutorily recognised in India even under the Amendment Act, even though institutional arbitration rules in India - Mumbai Centre for International Arbitration (“MCIA”) rules and Indian Council of Arbitration rules - provide for an emergency arbitration proceeding; however, it remains as yet untried whether courts in India will enforce an award granted by an emergency arbitrator in a domestic arbitration and the judicial position as of now remains that a suit may have to be filed for seeking enforcement of such awards by emergency arbitrator.

While scepticism continues to follow arbitration processes in India, there is definitely a positive trend towards easing the ability of foreign parties to enforce their contractual rights and allowing disputes to reach a conclusion by positive enforcement of arbitral awards.



Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 24, 2018

Legal Capsule: Corporate Governance in Listed Companies by Economic Laws Practice

The concept of corporate governance can be best described as a system of checks and balances within the corporate structure to facilitate long term value creation for stakeholders (and shareholders) due to the separation of ownership and management in companies. Sir Adrian Cadbury, in the UK Commission Report: Corporate Governance 1992 has correctly referred to ‘corporate governance’ being concerned with holding the balance between economic and social goals and between individual and communal goals. 

Evolution of Corporate Governance in India

The first reference to corporate governance in India’s legal framework can be found in the Companies Act, 1956. While our corporate governance norms have been developing over various years, the 2017 World Bank ‘Doing Business’ report ranks India at the 13th place in terms of minority protection, attesting to the progress made on this front in the recent years. 

The Satyam scandal in 2009, was a watershed moment in the history of governance regulation in India. Involving falsification of accounts by the top echelons of management and a fraud of over $1 billion dollars, this scandal motivated the Government of India to enact the Companies Act, 2013 which introduced wide-ranging changes to India’s corporate governance framework.

Evolution of Corporate Governance in India

(Click to view)
The LODR Regulations

The enactment of the 2013 Act brought about a shift from a voluntary approach to an ultra-mandatory approach towards corporate governance, with detailed governance norms being included in the primary legislation itself. Thereafter, the Listing Agreement was replaced by the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), which dealt extensively with governance matters, replacing the regime under Clause 49 thereof. Based on core concepts of adequate, timely and accurate disclosures of material information to all stakeholders, equitable treatment of all shareholders, recognition of the role of all stakeholders in governance, effective board supervision of the management, the LODR Regulations prescribed standards of governance higher than that contained in the Companies Act, 2013, given that the interests of small, retail shareholders required additional protection from acts of the majority.


Conclusion

Corporate governance in India has indeed come a long way. While these developments will inevitably enhance the regulatory compliance burden on companies, this is undoubtedly an impressive array of measures when viewed from the lens of corporate governance. Gone are the days when investors (including shareholders) would shoot in the dark with respect to their investments, relying on hearsay and tip-offs from friends and family while praying that they are not taken for a ride by the promoters and management. In marked contrast, the Indian investor of today is sufficiently empowered by robust corporate governance norms to take informed decisions. With effective implementation of the evolving norms, the evolving next phase of corporate governance in India seems to be on a fitting course.

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 21, 2018

Can Hike Recover from its Missteps?

Economic Times has an analysis on why and how Hike has seemingly lost the plot in India's high-stakes messaging battle ground. The article builds on the late May 2018 post by Hike founder Kavin Bharti Mittal that foretold the layoff of 25% of the Unicorn company's staff. Extracts:

In the last 18 months, Hike’s monthly active users (MAUs) have halved (37 million to 18 million) and its daily active users (DAU) diminished by two-thirds (23 million to 8 million), according to app intelligence service App Annie. 
...The common hypothesis within Hike was that a majority of its users were from tier IIIII (sic) towns and cities and those who could be classified as SEC B and C. But it failed to get the right market niche.   
...“For loyal users of Hike, people who love the product, there is use case for one person, say using it in hidden mode. And there exist multiple replicas of that one person. Ideally, Hike should have built around that audience, which is exactly what it didn’t do,” says the first person quoted in the story.
The article mentions the newer messaging app - the local language focused ShareChat - as having executed better than Hike. And that Hike might take the regional language route as well.

Or, maybe we can expect another VC-backed combination?

#HikeShareChatDeal anyone?

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 06, 2018

Chinese, Japanese funds bet big on India, doubled investments in two years: CNBCTV18

CNBCTV18 carried data from Venture Intelligence on PE-VC investments by Chinese and Japanese investors.


Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

June 01, 2018

Infrastructure sector sees growing foreign investor interest: Mint

A Mint article quotes Venture Intelligence data on PE/VC investments in infrastructure investments:

(Click to view)

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.